Nearly half of Costa Mesa city employees get layoff notices

Officials aim to contract work out to curb future pension obligations and eventually close a budget gap. A union leader says the city didn't try to negotiate other options. Workers are shell-shocked, and one dies in an apparent suicide.

Costa Mesa has sent layoff notices to nearly half of its employees in a dramatic austerity program being closely watched by other cities struggling with ballooning pension obligations.

The move was sharply criticized by union leaders, and it stunned city employees, one of whom apparently committed suicide by jumping off Costa Mesa City Hall hours after layoff notices went out Thursday.

City officials said the cuts were the first step in a plan to outsource many services to the private sector and significantly reduce the number of workers at City Hall.

Costa Mesa is among hundreds of local governments around the country facing massive future shortfalls in what they owe retirees. This year's tab — $15 million out of the city's $93-million budget — is estimated to grow to more than $25 million within five years.

But while other cities have attacked the problem with less generous pensions for new hires and by requiring current employees to contribute more of their paychecks toward retirement, Costa Mesa aims to contract out services it has directly provided for decades in a bid to curb future pension obligations.

"Clearly they are trying a new model," said Stuart Drown, executive director of the Little Hoover Commission, a bipartisan state public policy oversight agency. "A city that lays off half its staff — by any standard that's got to be considered a big move."

Costa Mesa "appears to have gone with the nuclear option," said Joe Nation, a professor of public policy at Stanford University who is studying the issue of underfunded public pensions.

Faced with an unprecedented pension and retiree healthcare crisis, "cities are being forced to look at things that would've been unthinkable before," he said.

Controversy over public employee pensions and benefits has roiled state and local governments in recent months as politicians scramble to cope with recession-socked treasuries.

Conservatives have attacked longstanding and seemingly unassailable perks won by public employee unions, and unions have struck back, unleashing bitter battles in Wisconsin, Ohio, Indiana and elsewhere — including California, where pension issues have complicated budget talks in Sacramento. And in Los Angeles and other cities, looming pension shortfalls threaten the future of basic services.

Maywood, a small city in southeastern Los Angeles County facing an array of financial troubles and the loss of its insurance coverage, tried an approach similar to Costa Mesa's last year when it laid off most of its employees, disbanded its Police Department and contracted municipal services with the neighboring city of Bell.

The move made national headlines as a way for cities to cope with rising expenses. But it quickly turned disastrous when Bell was consumed by its ongoing salary scandal.

Maywood is now trying to rebuild its city staff, but residents have complained about slower municipal services.

Costa Mesa's effort has become a rallying cry for some conservatives, who would like to see other cities follow suit. Scott Baugh, chairman of the Orange County GOP, circulated an e-mail applauding Costa Mesa officials before Thursday's layoffs and the suicide report.

"The good news is that a team of conservatives on the City Council led by our endorsed candidate, Jim Righeimer, is fixing the problem in Costa Mesa," it read.

The newly elected slate of council members, though, has said the move is about money, not politics. City leaders hoped outsourcing would eventually allow them to close a budget shortfall that stands at $1.4 million this year.

"This has been coming on for a long time, and we're coming to a point that's rock bottom," Mayor Gary Monahan told city employees at a recent meeting.

Added Councilman Eric Bever: "We're going to run out of money sometime this year if nothing changes."

But Helen Nenedal, president of the Costa Mesa City Employees Assn., which will bear the brunt of cuts, contended that money alone was not the motivator. She said the city moved unnecessarily quickly and didn't try to negotiate other options with employees.

"What happens here is going to happen through all the cities in Orange County and California," she said. "That's what you call politics."

The man reported to have committed suicide, a 29-year-old maintenance worker, was expecting to receive a layoff notice, authorities said. His identity has not been released pending notification of relatives.

Employees were shell-shocked upon receiving the notices Thursday, even before news of the suicide spread.